Could targeted ad opportunity be over before it starts?

Blessed with a treasure trove of information about their users — including down to the IP level thanks to technologies like deep packet inspection — most large telecom service providers have advertising at least somewhere on their new service revenue white boards.

Don’t count the pennies on those (potentially billions of) impressions too early.

The NY Times is reporting that a slew of online privacy and consumer protection groups are planning to ramp up efforts to get legislation passed that would severely limit so-called “behavioral” advertising — the exact kind of targeting that data-rich telcos are hoping to help enable. Without the ability to help advertisers and ad networks “re-target” via demographic, behavioral and contextual data about users, the telecom industry’s ability to add value to — and extract value from — the advertising value chain becomes extremely limited.

Here’s what these groups are legislate away:

No sensitive information (like health or financial information) should be used for behavioral tracking, no one under 18 should be behaviorally tracked, Web sites and ad networks shouldn’t be able to keep behavioral data for more than a day without getting an OK from the individual they’re tracking, and behavioral data can’t be used for discriminatory purposes.

Service providers potentially get hit in two ways if such limits are put in place. Providers that control mobile or IPTV experiences will take a direct hit to their potential advertising revenue, while any telco that could contribute data to ad networks would lose the ability to cash in on that data play.

Proposed legislation should start appearing this fall, according to the Times. The ad industry will likely rise up in opposition; the telecom industry most likely will watch from the sidelines, or at least work clandestinely with their lobbying groups, unwilling to fully associate themselves with this controversial area.

Either way, a potential important new revenue stream could be drying up before it even gets underway.

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